ED's Blog by The Godfather of Biodiesel in the Northeast

As we’ve discussed, proponents of overturning the ban on US Crude Exports cite the economic gain to be had, including jobs to be created.

An objection to lifting the ban on US Crude exporting is that given that US consumers are paying record prices for at-the-pump gasoline, it’s tough to see exporting the raw material to produce that gasoline.

Gasoline prices, however are determined by global markets not domestic supply per se, although there is an influence.

What's important to remember concerning the Crude Export ban is really two key factors:

It is permissible under US Law to export refined oils - ie finished products. If the argument for maintaining the ban is that it will negatively impact domestic gas supply, thats not really true as one could, today, export finished gasoline. In fact, the US is one of the world's largest exporters of finished (refined) diesel & gasoline.

Secondly, and more importantly perhaps - the US refinery infrastructure has understandably not been able to keep up with the boom in production of crude, in both refinery capacity and transportation ability. This is resulting in downward pressure on the prices producers can get from refineries for their Crude, making it less profitable. Continued downward pressure could remove the incentive to produce in the first place.

What does that mean for pump prices? It means the incentive to produce and sell domestic crude to be refined into gasoline is not really there. Which, in turn, means the banning of exporting crude is not some automatic way to increase the domestic supply of refined gasoline. Without a large increase in supply, you dont get a decrease in price.

So what about pricing if the ban is lifted?

Again, gas prices are largely globally influenced, however exporting to nations that have refinery capacity will drive up the total supply and potentially lower prices.

Outside of this, the economic benefits to the US are estimated to be in the billions - and with an improving economy, if gasoline prices remain stagnant they become a lower percentage of expense for individuals which essentially has the same impact as a price drop in a stagnant economy.

Will the oil tankers explode as spectacularly as the rail cars? We are finally making progress on the corn ethanol debacle in regards to the price of food, obama care is sucking the life blood from the expendable income of this economy... how about the oil industry and two formers take a break so the economy can recover? The lighter crude must be easier to refine and thus drive up the profit margins anyhow, isn't that what (supposedly) saved the Sunoco Refinery in S. Philly? Why export?

Kelly Burke

It is a lighter crude, thats part of the issue with refineries actually, they arent set up to refine a lighter crude. That has always been part of the issue in the Northeast & the refineries in Philly - when crack spreads between Brent and WTI got huge, it was a losing game to refine Brent. We export finished product now, if we are concerned about domestic supply, why not ban that? Exporting crude keeps the financial incentive there to continue pumping it out of the ground for a profit, keeps the shale boom going and let's face it fracking & shale oil industries are the bright spot in a dark economy at the moment.

chris green

From articles and commentary found here http://www.wtrg.com/prices.htm